M/s. Fairdeal Filaments Ltd.,, Surat v. The ACIT.,Circle-1,, Surat

ITA 2807/AHD/2009 | 2006-2007
Pronouncement Date: 23-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 280720514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 2807/AHD/2009
Duration Of Justice 6 month(s) 9 day(s)
Appellant M/s. Fairdeal Filaments Ltd.,, Surat
Respondent The ACIT.,Circle-1,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 23-04-2010
Date Of Final Hearing 19-04-2010
Next Hearing Date 19-04-2010
Assessment Year 2006-2007
Appeal Filed On 14-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MAHAVIR SINGH JUDICIAL MEMBER) ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 ASSTT.YEAR : 2004-2005 AND 2006-2007 FAIRDEAL FILAMENTS LTD. 3 RD FLOOR DAWAR CHAMBERS NR.SUB JAIL RING ROAD SURAT. VS. DCIT CIR.1 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.N.VEPARI REVENUE BY : SMT.NEETA SHAH O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE TWO APPEALS BY THE ASSESSEE AGAINST THE ORDERS OF THE CIT(A) DATED 31- 1-2007 FOR A.Y.2004-2005 AND DATED 15-9-2009 FOR A.Y.2006-2007 ARISING OUT O F THE ORDERS OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOM E TAX ACT 1961. SINCE GROUNDS RAISED IN BOTH THE APPEALS ARE COMMON FOR THE SAKE OF CONVENIENCE WE DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER . ITA NO.870/AHD/2007 FOR A.Y.2004-2005 2. THE FIRST GROUND RAISED IN THIS APPEAL READS AS UNDER: 1. THE LD.CIT(A) ERRED IN CONFIRMING RANT OF DEPRE CIATION ON MACHINERY IN WEAVING SECTOR AT LOWER RATE WHEN THE APPELLANT WAS ENTITLED TO DEPRECIATION AT HIGHER RATE AS PER THE PRESCRIBED RULES. 3. AT THE TIME OF HEARING BEFORE US IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE HAD PURCHASED PLANT AND MACHINERY USED IN TEXTILE INDUSTRY UNDER TUFS (TECHNOLOGY UPGRADATION FUND SCHEME) AND THERE FORE IT IS ENTITLED TO 50% DEPRECIATION AS PER APPENDIX-I PART-A III (6) . THAT THE AO DENIED THE ASSESSEES CLAIM OF DEPRECIATION ON THE GROUND THAT THE ASSESSEE IS ONLY IN THE BUSINESS OF TEXTURISING TWISTING OF YARN AND IS NE ITHER WEAVING NOR MANUFACTURING GARMENTS. HE HAS STATED THAT AFTER T EXTURISING AND TWISTING THE ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 -2- ASSESSEE IS UTILISING YARN FOR THE PURPOSE OF WEAVI NG AND THEREBY MANUFACTURING GREY CLOTH. THAT ON THE SIMILAR FACTS VARIOUS BEN CHES OF THE ITAT HAS ALLOWED THE DEPRECIATION AT THE RATE OF 50%. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE DECISION OF THE ITAT IN THE CASE OF BIPINC HANDRA MOHANLAL GAJJAR VS. ITO ITA NO.3128/AHD/2008 DATED 18-2-2009. THIS DE CISION WAS FOLLOWED IN THE CASE OF NANGALIA SIZERS P.LTD. VS. DCIT ITA NO .2214/AHD/2008. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SHE STATED THAT THE ASSESSEE IS NOT IN THE BUSI NESS OF WEAVING AND THEREFORE IT IS NOT ENTITLED TO HIGHER RATE OF DEPRECIATION. THEREFORE SHE SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED MATERIAL PLACED BEFORE US. THE AO REPRODUC ED RULES UNDER WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE OF 50 %. FOR READY REFERENCE WE REPRODUCE THE SAME AS UNDER: APPENDIX-I PART-A III. MACHINERY & PLANT :- SR.NO. MACHINERY AND PLANT DEPRECIATION ALLOWANCE AS PERCENTAGE OF WRITTEN DOWN VALUE. SR. NO.6 MACHINERY AND PLANT USED IN WEAVING PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDER TUFS ON OR AFTER THE 1 ST DAY OF APRIL 2001 BUT BEFORE THE 1 ST DAY OF APRIL 2004 AND IS PUT TO USE BEFORE THE 1 ST DAY OF APRIL 2004. 50 THUS THE ASSESSEE IS ENTITLED TO DEPRECIATION AT T HE RATE OF 50% ON THE PLANT & MACHINERY USED IN WEAVING PROCESSING AND GARMENT SE CTOR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDER TUFS. IN THE CASE OF THE ASSESSEE IT IS NOT IN DISPUTE THAT THE PLANT & MACHINERY IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE OF 50% WERE PURCHASED UNDE R TUFS BETWEEN THE PERIOD 1-4-2001 TO 31-3-2004. AS PER THE AO THESE MACHINE RIES PURCHASED UNDER ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 -3- TUFS WERE UTILIZED FOR THE PURPOSE OF TEXTURISING A ND TWISTING ACTIVITY AND THEREFORE THE SAME DOES NOT FALL WITHIN THE CATEGOR Y OF ALLOWABILITY OF 50% DEPRECIATION. WE FIND THAT IDENTICAL ISSUE IS CONS IDERED BY THE ITAT IN THE CASE OF NANGALIA SIZERS PVT. LTD. (SUPRA) WHEREIN THE IT AT FOLLOWING THE CASE OF VIPINCHANDRA MOHANLAL GAJJAR (SUPRA) HELD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION @ 50%. THE RELEVANT PORTION OF THE DE CISION OF THE ITAT READS AS UNDER: 5.3 THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITTE D THAT VIDE ITS ORDER DATED 18-02-2009 IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (SUPRA) THE ITAT AHMEDABAD D BENCH ALLOWED THE AP PEAL OBSERVING AS UNDER: 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS GONE THROU GH THE FACTS AND CIRCUMSTANCES AND ALSO ORDERS OF THE TAX AUTHORITIES. IT IS APPARENT FROM THE RECORD THAT T HE AO HAS RESTRICTED THE DEPRECIATION AT THE RATE OF 25% BY O BSERVING THAT AS PER RULE 5 OF THE IT ACT DEPRECIATION WAS ALLOWABLE @50% ONLY ON THOSE MACHINERY AND PLANT WHICH ARE ACTUALLY USED IN WEAVING PROCESS AND NOT ON MACHINE RY USED FOR TWISTING PROCESS. ON PERUSAL OF THE APPEN DIX-1 OF THE INCOME TAX RULES IT IS EVIDENT THAT THIS PARTI CULAR MACHINERY SHOULD BE USED IN WEAVING SECTOR AND DOES NOT RESTRICT THAT IT SHOULD BE USED IN WEAVING PROCESS OF THE TEXTILE INDUSTRY. SINCE ADMITTEDLY THE TWISTER MA CHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUSTRY DEPRECI ATION ON THE SAID MACHINERY AT THE RATE OF 50% SHOULD BE ALL OWED. THE ASSESSEE UNDERTAKES ALL THE ACTIVITIES RIGHT FR OM TWISTING OF YARN TO WEAVING TO MAKE FINAL GREY CLOT H. LIST OF MACHINERIES MENTIONED IN THE SCHEDULE PUBLISHED BY THE MINISTRY OF TEXTILE AND REFERRED TO ABOVE STATE MUL TIPLE PURPOSE AND USAGE OF TWISTER MACHINES. WE FIND THA T TAX AUTHORITIES HAVE NOT JUSTIFIED IN DENYING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE TWISTER MACHINE AT THE RATE OF 50% AND THEREFORE WE SET ASIDE THEIR RESP ECTIVE ORDERS AND ALLOW THE CLAIM OF THE ASSESSEE. 5.4 THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT T HE ABOVE DECISION OF THE TRIBUNAL IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THEREFORE THE CLAIM OF THE ASSESSEE MAY BE ALL OWED. 6. SHRI R. P. GHOSH LEARNED DR RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 -4- 7. AFTER HEARING THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT AHMEDAB AD D BENCH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR VS. ITO W -6(1) SURAT IN ITA NO. 3128/AHD/2008 DATED 18-02-2009 RELATING TO AY 2005-06. THE ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS SIMI LAR TO THAT OF THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (SUPRA). RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF BIPINCHANDRA MOHANLA L GAJJAR (SUPRA) WE HOLD THAT SINCE ADMITTEDLY THE TWISTING MACHINE WA S USED BY WEAVING SECTOR OF TEXTILE INDUSTRY DEPRECIATION ON THE SAI D MACHINERY @50% SHOULD BE ALLOWED. WE ACCORDINGLY ALLOW THE GROUND OF APPEAL. 5. THE LEARNED DR HAS TRIED TO DISTINGUISH THE ABOV E DECISION ON THE GROUND THAT THE ASSESSEE IS NOT IN THE BUSINESS OF WEAVING. HOWEVER WE FIND THAT IN THE ASSESSMENT ORDER ITSELF THE AO AT PAGE NO.1 OF THE ASSESSMENT ORDER HAS MENTIONED THAT THE BUSINESS OF THE ASSESSEE IS THAT OF MANUFACTURING OF THE GREY FABRICS SIZING TEXTURING AND TWISTING OF YARN . AT PAGE NO.3 OF THE ASSESSMENT ORDER THERE IS QUANTITATIVE DETAIL OF T HE USING OF TEXTURISED YARN OR TWISTED YARN FOR THE PURPOSE OF WEAVING. THE SAME IS REPRODUCED BELOW: A. TEXTURISED YARN TRANSFERS IN TFO UNIT. 350.050 KG. B. TEXTURISED YARN TRANSFERRED TO WEAVING UNIT 1896.92 KG. C. TFO YARN TRANSFER IN WEAVING UNIT 164251.17 KG. D. TOTAL CAPTIVE USED IN WEAVING UNIT=(B+C) 166148.08 KG. FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE HAS UTILIZED THE TWISTED/TEXTURISED YARN FOR THE PURPOSE OF WEAVING OF GREY CLOTH. IT WAS ALSO POINTED BY THE LEARNED DR AT THE TIME OF HEARING THAT THE ENTIRE Y ARN WAS NOT UTILIZED FOR THE PURPOSE OF WEAVING BUT WAS PARTLY SOLD IN THE MARK ET. IN OUR OPINION EVEN IF THE YARN WAS PARTLY UTILIZED FOR THE PURPOSE OF MAK ING GREY CLOTH THE ASSESSEE IS USING PLANT & MACHINERY FOR THE PURPOSE OF WEAVI NG. ON THE ABOVE FACTS DECISION OF THE ITAT IN THE CASE OF NANGALIA SIZERS PVT. LTD. (SUPRA) WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE S AME WE DIRECT THE AO TO ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 -5- ALLOW DEPRECIATION ON THE PLANT & MACHINERY PURCHAS ED BY THE ASSESSEE UNDER TUFS @ 50%. 6. GROUND NO.2 OF THE ASSESSEE IS AGAINST THE CHARG ING OF INTEREST UNDER SECTION 234B OF THE ACT. THE SAME IS ADMITTED TO B E CONSEQUENTIAL. WE THEREFORE DIRECT THE AO TO RE-COMPUTE THE INTEREST AFTER FINAL DETERMINATION OF INCOME. ITA NO.2807/AHD/2009 FOR A.Y.2006-2007 7. GROUND NO.1 OF THE ASSESSEE IS SIMILAR TO GROUND NO.1 FOR THE ASSESSMENT YEAR 2004-2005. FOR THE DETAILED DISCUS SION IN PARA-4 & 5 WE ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. 8. GROUND NO.2 READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD .CIT(A) ERRED IN NOT ALLOWING THE RELIEF BROUGHT FORWARD DEPRECIATION. 10. AT THE TIME OF HEARING BEFORE US NO ARGUMENT W AS ADVANCED WITH REGARD TO GROUND NO.2. ACCORDINGLY THE SAME IS TO BE TRE ATED AS NOT PRESSED. 11. GROUND NO.3 IS AGAINST CHARGING OF INTEREST UND ER SECTION 234B. WE DIRECT THE AO TO RE-COMPUTE THE SAME IN ACCORDANCE WITH THE LAW AFTER FINAL DETERMINATION OF THE INCOME. 12. IN THE RESULT THE ASSESSEES APPEALS ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD APRIL 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 23-04-2010 ITA.NO.870/AHD/2007 AND ITA NO.2807/AHD/2009 -6- VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD